Alerts and Updates

President Unveils Plan to Rebuild America's Infrastructure

February 13, 2018

The president's Plan proposes a federal investment of $200 billion into the nation’s infrastructure in order to stimulate at least $1.5 trillion in new infrastructure investment over the next 10 years.

On February 12, 2018, President Donald Trump announced his administration’s long-awaited framework for rebuilding infrastructure in America. The 53-page white paper, entitled “Legislative Outline for Rebuilding Infrastructure in America” (the “Plan”), sets out the White House’s proposal to dedicate federal dollars, empower and encourage local spending, and attract significant private sector investment in a wide range of infrastructure project initiatives. In particular, the Plan proposes a federal investment of $200 billion into the nation’s infrastructure in order to stimulate at least $1.5 trillion in new infrastructure investment over the next 10 years. The Plan also proposes to shorten the approval process for certain projects (as highlighted in the president’s State of the Union address)[1] and train the American workforce of the future.

The scope of the Plan is ambitious and includes financing initiatives for a wide array of infrastructure projects. In addition to addressing traditional infrastructure needs such as roads, bridges and airports, the Plan also seeks to spur investment in other assets, including drinking and wastewater systems, waterways, water resources, energy, rural infrastructure, public lands, veterans’ hospitals, and brownfield and Superfund sites. At the core of the Plan is a commitment of $200 billion in federal funds, which is expected to jump-start significant local and private sector investment in projects. It is not expected to be a stand-alone source of grant funding. The Plan calls for significant state and local funding, along with private sector participation. The proposed $200 billion is to be divided among a number of programs, including:

Infrastructure Incentives Program — $100 billion would be dedicated to the creation of an “Infrastructure Incentives Program” from which states and localities may seek grants for individual projects based on the achievement of pre-agreed milestones. This $100 billion would be divided in specific amounts and administered by the U.S. Department of Transportation, the U.S. Army Corps of Engineers and the Environmental Protection Agency. Grant applications will be evaluated on various criteria, the most important being the ability of the proposed project to secure and commit nonfederal and sustainable revenue for other infrastructure investments and for that particular project’s long-term operations and maintenance. The Plan also sets out a number of other guidelines limiting the potential amount of any one incentive grant.

Rural Infrastructure Program — $50 billion would be devoted to a new Rural Infrastructure Program, 80 percent of which would be allocated to state governors—giving states flexibility to prioritize their communities’ needs. Twenty percent of the funds are proposed to be reserved for rural performance grants within eligible asset classes. Additionally, a portion of the funds noted above would be set aside for tribal infrastructure and U.S. territories.

Transformative Projects Program — $20 billion would be set aside to provide federal funding for “bold, innovative, and transformative infrastructure projects.” This funding would support projects that “are capable of generating revenue, would provide net public benefits, and would have a significant positive impact.” Applications for disbursement of these funds are to be administered by the Department of Commerce.

Infrastructure Financing Programs — $20 billion would be used to advance major, complex infrastructure projects by increasing the capacity of existing federal credit programs, with $14 billion to be divided among the Transportation Infrastructure Finance and Innovation Act program (TIFIA), the Water Infrastructure Finance and Innovation Act program (WIFIA), the Railroad Rehabilitation and Improvement Financing program (RRIF) and the Department of Agriculture Rural Utilities Service Lending Program), and increasing the use of Private Activity Bonds (PABs) which accounts for the remaining $6 billion. Additionally, other enhancements are being proposed to the PABs program including a broadening of the types of projects eligible for funding, an elimination of the Alternative Minimum Tax preference for PABs and a removal of the state and transportation volume caps on PABs.

Federal Capital Financing Fund — A $10 billion dollar commitment would be used to create a revolving credit facility to permit the federal government to acquire assets it might otherwise be required to lease pursuant to various appropriations and scoring regulations.

Public Lands Infrastructure and Federal Real Property Dispositions — Various adjustments are being proposed to streamline the operations and maintenance and disposition of federal infrastructure assets.

It must be noted that converting the Plan into legislation will be an uphill battle. Shortly after President Trump’s announcement, Senate Minority Leader Charles Schumer announced that the Plan will “put unsustainable burdens on our local government.” The Plan places a much greater emphasis on state, local and private funding for infrastructure rehabilitation than has been the case in the past, when the federal government typically contributed 80 percent of the cost of projects. At the same time, the administration has substantially reduced the federal income tax deductibility of state and local taxes the Plan is intended to encourage.

It appears that innovative public-private partnerships (PPPs) will be needed to fill this gap and qualify projects for federal funding. PPPs can be used in infrastructure projects beyond the traditional toll road and airport development projects, but there are PPP naysayers on both sides of the aisle. Finally, earlier this month, Democratic Party leaders released their own infrastructure proposal, “A Better Deal to Rebuild America,” which calls for $1 trillion of federal investment in infrastructure, albeit without many details.

Despite the lack of bipartisanship currently gripping Washington, the announcement of the Plan will begin a much-needed discussion regarding the future of America’s infrastructure, which is in dire need of repairs and investment.

Notes

[1] From the 2018 State of the Union address: “Tonight, I am calling on the Congress to produce a bill that generates at least $1.5 trillion for the new infrastructure investment we need. Every federal dollar should be leveraged by partnering with state and local governments and, where appropriate, tapping into private sector investment—to permanently fix the infrastructure deficit. Any bill must also streamline the permitting and approval process—getting it down to no more than two years, and perhaps even one.”

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